Yesterday morning we commented that
the US Retail Sales report, which was due out later in the day, could have a
bearing on the recent strong downward trend in the Euro / dollar pair. It was
on the cards that the outcome for February might follow those for December and
January in being less than stellar. As noted, retail sales are a strong factor in
the fate of the currency, just as are employment figures and GDP growth.
Indeed, retail sales could be interpreted as an indicator for GDP, because
corporate profits are a component part of the formula for the latter measure.
The report yesterday was indeed disappointing. For other commentators, the weather has now
moved centre stage as an explanation, and this may well be true.
The OmiCronFX Mandelbrot algo routine
was set against the EURUSD pair at the start of the London session. The Retail
Sales report is one that, in the past, the big players in the market have seemed
to be able to anticipate. Yesterday was no exception, and in the middle of the
morning GMT the dollar started to weaken against the Euro. Mandelbrot took its
first trade earlier than that, which was stopped out at break-even. Its second
trade provided an excellent profit, as did its third, which was taken in the
ten minutes before the report release.
After that the market moved in a
sideways direction, with choppy price action (QE in the Eurozone is still exerting
its influence, after all). We stayed out of these stormy waters.
A
lesson for Forex traders who give monetary policy advice
It is the job of Forex traders to
attempt to anticipate the actions of those who are in a position to effect exchange
rate movement, and if necessary to react to the changes when they come. Some traders
have a tendency to prescribe monetary policy, but this is a mistake. It is imperative
that we deal with the world of Forex as we find it, not as we would like to it
be (computer algorithms are very good for this – they have no emotions).
We are grateful to the Australian
Business Spectator for an article criticising the Prime Minister of New
Zealand, himself a former currency trader, for impinging on the independence of
the central bank, the Reserve Bank of New Zealand (RBNZ), by commenting that
inflation in NZ now justifies a cut in core interest rates. It cannot be
forgotten that this would be popular politically, so the Prime Minister
has another motivation also.
However, we cannot escape the feeling
that if Mr. Key acted in anything other than a strictly objective manner when
he was trading Forex, he had better hope that his political career stays on
track and that he does not have to go back to working the markets again anytime
soon.
No comments:
Post a Comment